Clovis Oncology Inc (CLVS) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter and year-end 2015 Clovis Oncology earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator instructions)

As a reminder, today's conference may be recorded.

I would like to introduce your host for today's conference, Ms. Breanna Burkhart. Ma'am, please go ahead.

Thank you.

Good afternoon and welcome to the Clovis Oncology fourth-quarter and year-end 2015 conference call. You should have received the news release announcing our fourth-quarter and full-year 2015 financial results. If not, it is available on our website at www.clovisoncology.com.

As a reminder, this conference call is being recorded and webcast. Remarks may be accessed live on our website during the call and will be available on our archive for the next several weeks.

The agenda for today's call is as follows. Patrick Mahaffy, Clovis's President and CEO will discuss the highlights of the fourth quarter and the year and provide an update on our clinical development program. Then Erle Mast, Clovis's Chief Financial Officer, will cover the financial results for the quarter and the year in more detail. Patrick will make a few closing remarks and then we will open the call for Q&A.

Before we begin, please note that, during today's conference call, we may make forward-looking statements within the meaning of the Federal Securities Laws including statements concerning our financial outlook and expected business plan. All of these statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statement. Please refer to our recent filings with the SEC for a full review of the risks and uncertainties associated with our business.

Forward-looking statements speak only as of the day on which they are made and Clovis undertakes obligation to update or revise any overlooking statements. Additionally, please note that we will be discussing adjusted net loss, a non-GAAP financial measure during today's conference call. Required disclosures related to this are in today's news release which can be found on our website.

Now, I'll turn the call over to Patrick Mahaffy.

Thanks, Breanna.

Welcome, everybody. I apologize, I'm fighting a cold. Thank you for joining us this afternoon. We look forward to an eventful and hopefully transformational 2016, including the upcoming ODAC panel to discuss the NDA for rociletinib, followed by its PDUFA date of June 28.

During the second quarter, we will also expect to complete the filing for our first NDA for rucaparib for the treatment of advanced ovarian cancer. Our US commercial and medical affairs organizations are ready to go, and enthusiastic about the potential to launch two oncology drugs in the next twelve months.

Now let me provide more of an update for each of our products in greater details. First is rociletinib. For our regulatory filings submitted last July for rociletinib for the treatment of patients with advanced EGFR mutant T790M positive non-small cell lung cancer remain under review in both the US and the EU.

In the US, we are actively preparing for the now-confirmed ODAC panel discussion to take place on April 12. Our team is working very hard in preparation for the meeting and we remain committed to making this drug commercially available for patients with EGFR-driven T790M positive non-small cell lung cancer for whom additional treatment options are very much needed. As I noted earlier, our PDUFA date is June 28, 2016.

Turning to our MAA filing in Europe, at the time of filing we agreed to provide 120-day clinical data update. We received the initial questions in December and have also held clarification meetings with our rapporteurs. We plan to respond to the120-day questions and provide the clinical update in May which should result in a CHMP opinion by the end of the year.

We recently began our first study of rociletinib in combination with an immuno-oncology agent, in this case, Genentech's atezolizumab, or anti-PDL1 antibody for the treatment of advanced EGFR mutant non-small cell lung cancer. Importantly, we expect to have initial data from this trial by a fall 2016 medical meeting.

Turning now to our PARP inhibitor rucaparib, we continue to view rucaparib as a highly differentiated PARP inhibitor based on the data generated to date in ovarian cancer in two discrete populations of patients: Tumor BRCA mutant patients, which includes those with germ-line and somatic mutations of BRCA; and in patients whose tumors have other DNA repair deficiencies including those with high genomic loss of heterozygosity, or LOH, that caused them to behave similarly to tumors with BRCA mutations. I'll refer to those as BRCA-like or those with a BRCA-like signature.

Data presented in 2015 demonstrated rucaparib's response rate and medium duration of response in platinum-sensitive ovarian cancer patients with BRCA mutant tumors, including those advanced patients who have received three or more prior lines of therapy. In addition, rucaparib is the only PARP inhibitor to have shown demonstrated efficacy in a prospectively defined BRCA-like population beyond mutant BRCA.

We believe that the activity observed in the mutant BRCA ovarian cancer population is the reason we were granted Breakthrough Therapy designation by the FDA, in April last year. As previously announced, during the fourth quarter of 2015 we completed enrollment of the mutant BRCA population we intend to include as the basis for our NDA submission for rucaparib in the treatment of advanced ovarian cancer with the tumor BRCA mutation inclusive of both germ-line and somatic mutations.

This represents a blended population of patients from our ongoing treatment studies. Study 10, ARIEL2, and ARIEL2, part 2, and includes platinum sensitive, platinum resistant and a handful of platinum refractory patients. Our rolling submission to the FDA is expected to complete during the second quarter of 2016 and an MAA submission for the treatment of ovarian cancer to the EMA is planned before the end of 2016.

In addition, ARIEL3 is our phase III registration study comparing the effects of rucaparib versus placebo. The study is evaluating whether rucaparib, given as maintenance therapy in platinum sensitive high-grade ovarian cancer patients, can extend the period of time from which a response to a prior chemotherapy is maintained. We continue to expect to complete enrollment in ARIEL3 in the next few months, and to report results from this study approximately 12 months after enrollment is completed.

Pending data, we hope to follow this with a supplemental NDA for maintenance therapy for advanced ovarian cancer patients with a tumor BRCA mutation and potentially also in patients with BRCA- like mutations. Two investigator-sponsored studies exploring rucaparib's activity on different breast cancers are currently initiating and an additional investigator-initiated study in gastroesophageal cancer is expected to initiate in the near term.

Prostate cancer is a very high priority for us, as it represents a substantial market with significant unmet need, and we plan to initiate two prostate cancer trials. First, a Clovis-sponsored study in metastatic castrate resistant BRCA mutant prostate cancer patients, inclusive of both germ-line and somatic patients. And second, in collaboration with the Medical Research Council in the UK, rucaparib will be studied in what is known as the Strat-Stampede Study in newly diagnosed castrate-sensitive de novo metastatic tumor, BRCA mutant and BRCA-like prostate cancer patients.

Turning now to lucitanib, which is our oral potent inhibitor of the tyrosine kinase activity of VEGF, PDGF and FGF receptors. Clinical data to date suggests that its VEGF inhibitory effect is the most pronounced, our future development plans will likely focus on combination studies as we believe they're the most likely regulatory path for lucitanib.

As we previously announced, we recently discontinued enrollment in the Clovis-sponsored phase II study in advanced lung cancer patients with FGF receptor aberrations, which was a very challenging study to enroll. We are continuing to enroll in our breast cancer study and expect enrollment in that study to complete this quarter, and we will determine with our partner Servier when the data from our study and their study will be presented at a scientific meeting.

Now I will turn the call over to Erle to discuss fourth-quarter and FY15 financial results.

Thanks, Pat. Afternoon, everyone.

Our fourth-quarter and our year-end 2015 financial results are included in this afternoon's press release. I'll review the highlights of our financial results and provide some additional commentary.

And let me start with our balance sheet. We ended 2015 with $528 million in cash, cash equivalents, and available-for-sale securities and working capital of $464.1 million. Our cash used in our operating activities was $75.7 million for the fourth quarter of 2015, and it totaled $253.1 million for the full year of 2015 and that includes $12 million of rociletinib milestone payments that we made in the third quarter of 2015.

After backing out or excluding share compensation expense, our fourth-quarter research and development and general and administrative expenses totaled $73.3 million, which was in line with our operating cash burn for the quarter. Our operating results for the fourth quarter and the full year 2015 were significantly impacted by two non-cash items. Both of these transactions relate to our 2013 acquisition of the lucitanib product rights which we obtained through the purchase of Ethical Oncology Science or EOS.

First, in the fourth quarter of 2015, we recorded a non-cash impairment charge of $89.6 million to reflect a reduction in the estimated fair value of the intangible asset related to lucitanib which was recorded as part of the EOS purchase price accounting. This reduction in fair value was the result of ours' and our development partners' decision to terminate the development of lucitanib for lung cancer, as well as updates to the probability- weighted discounted cash flow assumptions for the breast cancer indication.

We also recognized a deferred income tax benefit of $28.6 million associated with this charge, so the after-tax impact on our net loss was $61 million. In connection with our acquisition of EOS, we were obligated to pay additional consideration to the former EOS shareholders if certain future regulatory and sales milestones for lucitanib are achieved. The estimated fair value of these contingent payments is recorded as a liability on our balance sheet.

And during the fourth quarter of 2015, we recorded a $26.9 million reduction in the fair value of this contingent consideration liability due to a change in the estimated probability-weighted future milestone payments. This reduction is included as a credit to our operating expenses in our 2015 results of operations.

Clovis reported a net loss prepared in accordance with US GAAP for the fourth quarter of 2015 of $119.5 million or $3.12 per share, and $352.9 million or $9.79 per share, for the year ended December 31, 2015. Now our adjusted net loss which excludes the impairment in the contingent liability reduction I just described, was $85.4 million or $2.23 per share for the fourth quarter of 2015, and $318.8 million or $8.85 per share for the year ended December 31, 2015. The net loss for the fourth quarter of 2014 was $54.9 million, $1.62 per share, and $160 million, or $4.72 per share, for the year ended December 31, 2014.

Research and development expenses totaled $76 million for the fourth quarter of 2014 and $269.3 million for the full year and that compares to $50.1 million for the fourth quarter of 2014, and $137.7 million for the full year 2014. This increase in expenses for both periods is due to the significantly expanded clinical development activities for rociletinib and rucaparib, increased commercial product planning costs associated with the potential approval and launch of rociletinib and increased personnel-related expenses associated with the hiring of additional staff to support our expanded activities, including the hiring of our US commercial and medical affairs organizations which was completed in September of 2015.

General and administrative expenses totaled $8.2 million for the fourth quarter of 2015, and $30.5 million for the full year 2015, and that compares to $5.6 million for the fourth quarter and $21.5 million for the full year 2014. This increase in the 2015 amounts over 2014, is primarily due to personnel costs for employees engaged in G&A activities, also to increase facility costs and higher professional fees.

Finally, operating expenses for the fourth quarter of 2015 and for the full year ended December 31, 2015, include share-based compensation expenses totaling $10.9 million for the quarter, and $40.4 million for the full year respectively.

Now, at this time, we are not providing operating expense or cash guidance for 2016 since there are a number of upcoming events that will affect those metrics, including the timing of a possible US approval and launch of rociletinib. With the upcoming June 28 PDUFA date, over the next few months we expect to have better visibility and we will revisit our financial guidance for 2016 at that time.

So with that, I will turn the call back over to Pat for some closing remarks and then we will open up for Q&A

Thanks, Erle.

I will briefly review our near-term highlights and milestones before opening the call for Q&A. For rociletinib, all efforts were focused on our regulatory submissions. In the US we have the ODAC panel discussion on April 12. This will be followed by the PDUFA goal date of June 28. In the EU, the submission in May of our 120-day questions in clinical updates that results in a CHMP opinion by the end of the year.

For rucaparib, we are focused on the NDA submission for the ovarian cancer treatment indication which is expected to complete during the second quarter of this year. The MAA is planned by the end of 2016. For lucitanib, we will continue to explore its activity in our ongoing breast cancer study and in combination with other agents in a variety of indications.

We've been through a lot of turbulence in the past several months, and obviously have some very important events ahead of us, but, if events go as we hoped, we should be commercializing two products in the US by this time next year and beginning to commercialize our first product in Europe as well.

We will now open up the call for Q&A.

(Operator instructions)

Cory Kasimov, JPMorgan.

Hi, guys, this is Whitney [Ijem] on for Cory. Just looking at the roci ODAC panel, just wondering if your interactions with the FDA throughout the process have given you any insight into the issues to be discussed or what the FDA is looking to flesh out with that panel?

Yes, it's obviously a very important question, and we don't have a perfect answer yet. Although, I imagine we will know more over the course of the next several weeks.

Obviously, any ODAC is going to consider the benefit risk of a given therapy. And since the comparator will be chemotherapy, we think we have a very, very good story to tell about what this drug does for patients with this very advanced form of lung cancer.

It is, I think, likely, that the FDA will also want to use the ODAC as an opportunity to discuss the dose selection, and looking at both the 500 milligram and 625 milligram dose. And in particular, I think it is going to be important to FDA, not just for us, but it's a broad interest of theirs to discuss the general relationship of exposure to benefit. And so, I think there will be a good discussion. And I think the primary focus of that discussion beyond benefit risk, the obvious one, is going to relate to dose and its relationship to exposure.

Okay, got it. And can you just remind us how many patients are in the NDA package at each dose?

In the NDA package, the efficacy data set for the 500 milligram dose is 78 or 79 patients. And for the 625 milligram dose is 171 patients.

Got it; thanks for taking the question.

[Kennen MacKay], Credit Suisse.

Hey, this is Lee [Kalowski] for Ken. Just wondering about the commercial organization, so given some of the uncertainty ahead, can you talk a little bit about the retention within your sales organization?

Yes, I can. I'm delighted to say that this is a very committed team with a great amount of enthusiasm for the opportunity to launch rociletinib and rucaparib. I think our metrics look really good, not just in the context of our delay, but broadly across the industry we are in.

The turnover we have had since June 1 in the commercial organization is 4.6%, which I think actually compares really favorably to other companies in our industry just in the normal course of events. And in terms of the sales reps in general, we have lost just a handful of reps. So we are really impressed with their commitment and their belief in these two products.

Just a follow-up question there. So where do you really see roci being fit in the standard of care, just given that the overall response rate is significantly lower than what was initially shown?

It is lower than was initially shown. There's no doubt about that. But it remains meaningfully better then chemotherapy. And in contrast to the recently approved agent, it was treated primarily in a Western population which we know do worse on this class of compound, including the recently approved agents, than patients of Asian heritage or Asians do.

We tested patients who had, had on average at least three prior therapies, so these are very advanced patient populations, and are still able to deliver not just real benefit in those patients who show a response, but as you are probably aware, the majority, the vast majority of patients, have a good amount of disease control. In fact, 80%-plus of our patients have good and enduring disease control. So it may not have met the high hurdle of a response rate, but still provide real benefit in symptomatic relief for these patients.

We have a different side effect profile, some that patients may prefer, some they may prefer not to have compared to the competitor. But I imagine that, if approved, this drug will compete and compete well for patients who really need new options for the treatment of their disease.

Great, thanks.

Roy Buchanan, Janney.

Hi, guys, thanks for taking the question. Just a follow-up, I guess, on the JPMorgan question. I think on previous calls, maybe you guys have said that an agreement -- or a level with the FDA had been reached for the patient numbers they wanted to see. Just wonder if that level was achieved with the confirmed response data, and if it holds true for the individual doses?

We have not had any indication from the agency that the number of patients in the NDA is not sufficient for them to conduct their review. So it's not been an issue. Anything can become an issue over time, but that has not been an issue at all in any of the dialogue we've had with the FDA.

Okay, very good, thank you. And then I had a question on rucaparib. I guess Medivation has been talking about PARP trapping.

I'm not sure I totally get that yet. Do you guys have any thoughts on that?

And I wonder if you could differentiate your approach to HRD versus what the other companies are looking at, how you are defining that? Thanks.

Yes, what really matters to a patient with advanced ovarian cancer is whether or not a drug provides a benefit in that human being who is being treated. Random preclinical studies that show a different behavior in a preclinical cell-based model have zero [effect] on the benefit to the patient.

And since we have shown in multiple presentations the highest confirmed response rate in a mature patient population that has been seen with any PARP inhibitor, I would say that what one should focus on is patient benefit, not [cell] culture experiments. So I will put rucaparib and its data in patients in need up against any PARP inhibitor because none have shown the quality of data that we have in a mature patient population, at least not have to date. So I think it's silly and, I guess, people do silly things.

As to our approach to HRD, it is driven by the percentage of genomic scarring in a patient's tumor sample. We have not revealed the percent, the cutoff that we have used for proprietary reasons.

We will be showing at ASCO, I believe this year, not only the effects of that initial cutoff, but we will be able to describe what happens when you move the cutoff slightly. And the reason that's so relevant is that we have changed prospectively the application of the cutoff we are using for the ARIEL2 and the ARIEL3 studies.

So it's an assay that we developed with our collaborators at Foundation. Others with PARP inhibitors are using a competitive HRD assay developed by a different diagnostic company. But I don't believe any prospective data from that assay with a PARP inhibitor has been shown yet, so it's hard to make comparisons.

Okay, very good, thank you.

You bet.

(Operator instructions)

Tom Shrader, Stifel.

Hello, this is Alex Schwartz filling in for Tom Shrader. I had a question about rucaparib and the maturing of the data. So in ARIEL2, I believe at ASCO you showed four CRs and then at ESMO there were six CRs, so two CRs developed a little later. A late response is a unique feature of this drug? And can you talk about that a little bit more, please?

So I'm not sure that was in the same study. Those different CRs, I think they were in different studies. So I don't have an update on additional CRs that may have occurred over the course of the maturing data set.

I will say that we do see one distinct difference in the time to benefit in rucaparib. Patients who are platinum sensitive tend to show their response after a much -- not a much, but a fewer number of cycles than those who are platinum resistant. So I think that is a really interesting phenomena that we have observed.

The majority of our patients in the NDA populations, a pretty meaningful majority of those patients remain platinum sensitive, but we have seen that it takes a longer period of time for patients who are platinum resistant to develop their responses. I don't know yet that we have a hypothesis as to why. Empirically, it is what we see.

Okay. Excellent, thank you. And then, one other question I had about rucaparib as well in ARIEL4. Were the details of this trial set by the BRCA designation process and can you give us a sense of the size and duration? I'm thinking about this trial for modeling purposes.

Yes, the details of this were not so much related to our having breakthrough status for the drug as to the fact that we are filing in the second quarter as an accelerated approval and any time you file for an accelerated approval you require a confirmatory study. The size of the trial that we are anticipating for ARIEL4 will be approximately 400 patients.

We would expect to initiate that trial in the second or third quarter of this year, more likely third quarter. And I don't know that we've put together yet a time line for completion of that trial. It will be a few years.

Okay, okay. Excellent. Thank you for the details, and looking forward to more updates.

Thank you.

I'm showing no further questions. I'd like to turn the conference back over to Ms. Breanna Burkart for any closing remarks.

We thank each of you for your interest in Clovis Oncology today. If you have any follow-up questions, please call me at 303-625-5023 or Anna at 303-625-5022. This call can be accessed via a replay of our webcast at www.clovisoncology.com, beginning in about one hour, and will be available for 30 days.

Again, we appreciate your interest and time. Thank you and have a good evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day.